Thursday, December 22, 2011

High-Speed Rail is Criticized for Counting Construction Jobs the Same Way as Metropolitan Water District

This article in the San Jose Mercury News was interesting (.)  High-Speed Rail backers have been claiming it will create 1 million jobs, by adding up all the person-years of employment into one number.

California high-speed rail jobs estimate too good to be true
Though California's high-speed train faces an intensifying backlash over its $99 billion price tag, political leaders from Washington to Sacramento justify the cost by touting another huge number: 1 million jobs the rail line is supposed to create.

But like so many of the promises made to voters who approved the bullet train, those job estimates appear too good to be true...

"Job-years and jobs are like apples and Twinkies, they're not even in the same food group," said Elizabeth Alexis, a Palo Alto analyst who testified before Congress about the project last week. "It's not accurate, and it's misleading...

Government agencies routinely calculate temporary construction jobs by the year, but it's unusual for public officials to lump all those estimates together. For instance, the White House tells recipients of stimulus funds not to count workers multiple times like officials have done on the rail project...

What's more, officials have not taken into account the potential job losses from the railroad, which will displace many businesses along the train route, including several along the Caltrain corridor between San Francisco and San Jose. And within the last month, the California Legislative Analyst's Office said other state programs could cut jobs so the state can afford the $20 billion debt to pay its portion of the rail line

The Mercury News could write a virtually idential article about the Metropolitan Water District study that estimates building isolated conveyance will create 133,000 jobs.  The issues are the same.  From the MWD home page:
Construction of Tunnel for State Water Supplies Could Create Nearly 130,000 Jobs in California

The results of a report estimate that nearly 130,000 jobs would be created by the construction and operation of two conveyance system options to deliver water to Californians. The Metropolitan Water District of Southern California commissioned The Brattle Group to conduct this independent research on behalf of the Delta Habitat Conservation and Conveyance Program (DHCCP).
Personally, I am glad to see the bad press on this.  I have been complaining about the increasing trend towards reporting person-years of employment as jobs for quite a while.  I would like to see it eradicated.

Monday, December 19, 2011

Stockton, other Valley cities, at the bottom of yet another economic ranking. Few Corporate HQs in the Valley.

The Wall Street Journal's "Marketwatch" ranked Stockton last of the 102 largest metro areas in the U.S. in a ranking of "Best Cities for Business."  Inland California metro areas occupied the bottom 4 spots on the ranking: 102. Stockton, 101. Riverside, 100. Fresno, 99. Sacramento.  I hate these type of rankings, and have made fun of the Forbes "miserable city" rankings, including poking them for not posting their entire list so we can see what cities' are "least miserable."

The Marketwatch ranking is a little better, it at least publishes the whole list from top to bottom, and measures something much more specific.  It also includes some information on corporate headquarters that I have wondered and speculated about in the Valley, but never seen the data compiled.  I have often commented on the lack of a corporate, private sector presence in Sacramento compared to other places I have lived, and have also observed that many (most?) of the farming and food processing companies so important to the Valley are not headquartered here or owned locally.

The Marketwatch rankings include company rankings (S&P 500 headquaters, Forbes large private company hq, Russell 2000, etc.) and economic rankings (the usual suspects such as unemployment, job growth, etc.)  The Valley cities actually fared worse in the corporate rankings than the economic rankings.  [Detrioit, Dayton and Toledo Ohio were last in the economic rankings.]  Here are some interesting facts regarding the corporate presence in inland California according to Marketwatch.
  • Riverside has the distinction of being the largest city in the U.S. without a Fortune 500 or S&P 500 company within its borders. (Riverside/San Bernadino is the 13th largest MSA in the U.S. with a population of 4.2 million.)
  • Sacramento is the second-largest city, behind Riverside, with no S&P 500 or Fortune 500 firm. (Sacramento is the 24th largest MSA in the country, population of 2.1 million.)
  • Fresno, the Central Valley's largest metro area, has no Fortune 500, S&P 500 nor Forbes private firms, and it is the largest city in the U.S. without a Russell 2000 company.
  • Modesto is the comparative, corporate stalwart in the Valley, and the smallest of the Valley metro areas in the ranking.  Still, it isn't exactly impressive.  Marketwatch says, "Modesto does boast a decent lineup of Forbes private firms — Save Mart Supermarkets, E&J Gallo Winery and Foster Farms — but has no Fortune 500, S&P 500 or Russell 2000 companies."
  • Fresno was last in the overall company rankings, followed by McAllen TX, Stockton, Bakersfield, and Sacramento. 

Governor Brown should have attended the Delta Stewardship Council meeting last Thursday

Last Thursday, Governor Brown was at a climate change conference in San Francisco.  According to the Sacramento Bee, he said regarding a potential peripheral canal/tunnel, ""It will cost money," he said. "But if we don't do that, and the levees collapse in one of these extreme events, we could run out of fresh water."  Yesterday, in a statement in support of BDCP he said, "We shouldn’t wait for a natural disaster to force our hand... This agreement takes us in the right direction to protect California’s water supply."  Governor Brown is clearly worried about earthquakes and floods in the Delta and their implication for water exports.

If he were at the DSC meeting last Thursday, he would have heard Bob Gilbert, a reknowned geotechnical engineer and risk management expert from the University of Texas.  Dr. Gilbert was on the peer review team for the DRMS study a few years ago, and chaired the recent peer review for the Delta Protection Commission's Economic Sustainability Plan.  He made these comments:
"seismic risk to the water supply really is not that significant."
"If you look at the consequences... the net present value over a 100 year window of water supply losses is about $2 billion ... does not in any way justify spending $10 billion on conveyance."
"reliability of water supply due to earthquakes is not a big threat"
(Note: the basis for the comments are the DRMS studies, quotes are from my meeting notes and may not be exact)

Dr. Gilbert was there to review the Economic Sustainability Plan, and I should note that the context of these remarks was not criticizing BDCP, he was criticizing the DPC's Economic Sustainability Plan claim that seismic levee upgrades would improve water supply reliability.  But it is interesting that much of the criticism was based on the fact that the seismic risk isn't that big (expected annual loss of $20 million a year if you believe the DRMS earthquake probabilities), and the bigger water supply risks are environmental rulings and water quality. 

In my remarks, I chimed in with a few additional relatively unknown findings from DRMS:
  • Water export interruptions are only 20% of the economic cost from a large Delta earthquake that floods 10-30 islands.  (See earlier post on this here.)
  • Water export interruptions are less than 2% of the economic cost from Delta flood events.
  • Water export interruptions cause 0% of the loss of life from Delta earthquakes and floods.
This is why DRMS found levee investments have the highest benefit-cost ratio of all Delta risk reduction strategies (yes it's true, although DWR did not report the benefit-cost ratios), because levee improvements protect all the economic risks (energy, transportation, property, farmland, human life, recreation, water quality and water conveyance among others).  In contrast, the isolated conveyance strategy spends an enormous amount of money protecting against a relatively small portion of risk.

Governor Brown needs a better understanding of the risks from natural disaster in the Delta.  On an encouraging note, this KPBS report on the climate change conference suggests he is unbiased and knows he still has more to learn about the issue,
The governor said under California law he's not allowed to say which proposal he supports until the report is released.
"In addition, I haven't really read the damn thing. And so I don't have a bias because I don't know what the hell it is," joked Brown.

Monday, December 12, 2011

Westlands has lowest fallowing in a decade in 2011 while Mendota sets unemployment record (according to CA EDD)

Thanks to this year's abundant precipitation, Westlands' 2011 crop report shows harvested acres increased by 139,000 acres compared to 2009 (and about 70,000 acres higher than 2010).  This is the highest level of harvested acres reported by Westlands Water District since 2000.  Cotton increased by more than 70,000 acres with lower increases in wheat, onions, garlic, lettuce, almonds, and pistachios.  The increaed production undoubtedly provided an economic boost to the area.

Despite the increased farm production, according to California EDD, Mendota's unemployment rate averaged a record 42.3% in the first 10 months of 2011, but don't expect any news reports on this shocking statistic despite the fact that unemployment is 4.5 percentage points higher than the 38.7% recorded during the 1st 10 months of 2009 in the peak of the water/unemployment media frenzy.

Of course, I don't believe this estimate now any more than I believed it in 2009.  Unemployment has almost certainly dropped in Mendota.  I have explained before why this EDD methodology for estimating unemployment in small towns; especially farming towns; is enormously flawed and should be ignored.  Maybe now a few more people will believe it.

For a more reliable estimate from a valid survey, the Census Bureau's 2006-2010 ACS estimated Mendota unemployment averaged 21.6% over that 5 year period.  My rough guess is that it is probably around 25% this year, and was around 30% during 2009.

This is probably one too many posts on this topic.  Sorry for the redundancy, but with Westlands crops data and the latest 5-year ACS estimate of Mendota unemployment released this month, it seemed worth an update.